300536 Project In Construction: Property Assessment Answer

Standard Instructions for Valuation Reports of Office, Industrial and Retail Investment Property for First Mortgage Security Purposes

Purpose

The purpose of this assignment is to enable you to:

• Apply the processes and techniques used in development and investment appraisal and the economic evaluation of complex building projects.

• Evaluate and recommend the processes and techniques used to prepare property valuation reports.

Task

Students are required to submit a professional report that values a site for a retail building development. The report should include all the processes and techniques used in the economic evaluation of a proposed commercial retail development 

Property Valuation Report 13/ 82 Gateway Boulevard Epping, VIC 3076

Property Valuation Report

Primary as well as secondary sources were used in the analysis, which is present in the report. The secondary data was used in gathering the information with respect to the demand, sales price, demographic and trends.

Summary of Facts and Conclusions

Problem Analysis & Value Definition

Reason for the Valuation

The main aim of the report is to estimate the current market value of the subject size on behalf of the client who is a potential buyer.

Evaluation Date

The date that the property was inspected is as follows:

Date of Valuation 13th December 2017

Date of Inspection: 10th December 2017

Assumption from Client

The client specification states that he would like to buy the property for retail purpose of a café or restaurant.

Definition of Interests to be valued

The site is located at 13/82 Gateway Boulevard Epping, VIC 3076.

Items to be excluded in the valuation

A small shed is available just beside the property and needs to be excluded from the valuation process.

Property Analysis  

This section of the report will be analyzing the property in terms of the productivity. The advantages and the disadvantages will be weighed upon and a brief analysis of the alternative use of the property will be provided.

Physical Characteristics

Site Description

The following property has been identified on the site: 

 
The site is rectangular and is already build in the form of a café or a restaurant. The approximate area of the land is 154m2.

The site has other retail blocks near it and the property is facing a road.

Improvements

Building Improvements

It has been erected on site. The property is in the form of a long rectangle with the property in subject being the front part of the property. The property is well maintained however, it requires modifications and renovation. Its current fittings are like a café facing the road ahead. The café has the capacity of outdoor usage. There are six onsite parking spaces available

Non- building Improvement

These improvements include a metal fencing, a concrete driveway and a path near the front door. There are some services linked to the site such as water, sewer and electricity.

Conclusions

The site consists of certain beneficial features that have affected the valuation of the site. These include:

• Retail tenancies
• Onsite parking space
• Developed infrastructure
• Corner front facing site

Legal Characteristics

• Restrictions on Title

The title was not available and hence, made subject to the land and the title is unrestricted by an easements or other planning restrictions, which may have otherwise affected the value

• Current Lease

The property is under a single lease plan. This would contribute to the cash flow of the property

• Town Planning Constraints

Gen Eira council is the authority responsible for the planning. The site is under the Commercial 1 zone with its outline under the clause 34 o the planning scheme. The site is also under a car-parking overlay.

A clause states that the height should not exceed 9 meters.

• Political Factors

The re-development of the train station is under construction, which is being funded by the government. The traffic flow and noise will be present.

• Conclusions

It can be said that the site has the potential to be build up to two storeys.

Location Characteristics

• Regional Location

The site is located in Epping, which is near the suburbs, which are developed in nature and mature.

The road nearby is a major access way for various transportation facilities. There are various Retail shops, Primary school, and hospitals located nearby.

• Conclusions

Epping is a mature and well-serviced suburb. The site benefits from being located in the locality and is near to various amenities like parks, schools, restaurants and shops. 

Environmental Characteristics

• On site factors

The side yards are clear and the site is surrounded by other buildings. Other environmental characteristics were difficult to determine. Hence, it is assumed that there are no hazards present

• Off-site Factors

The site is independent and has no such impact on the community.

Psychological Characteristics

• The Locality

Epping can be categorized as an upcoming suburb where various buildings are re-developed. The locality mostly consists of younger generation families and children.

• The Property

The property is in a reasonable condition.

When the train lines will be developed, it will increase the desirability of the area.

• The market

The property market in Epping mostly consists of renters.

Epping has become a popular suburb where the renters have priced their property at 150000$ approximately. The prices have remained steady over the last few years.

According to sites like realestate.com.au, Epping has a higher market demand in Victoria for the specialized rent properties.

• Conclusions

The people living in Epping are young or family’s majority of whom are renters. The market has a lower risk of investment and has a high demand.

Evaluation of Alternative Uses and Selection of Probable Use

Possible Alternative Uses

As per findings the other uses can be:

• Keeping the site as it is. It is in the form of a restaurant and can be kept that ay
• Redevelop into mixed use of a retail shop with the café to attract more customers.

Selection of Probable Use

As per the client requirement, the property would be kept as it is and that it will be the probable use of the site. Therefore, the valuation following, will be assuming the same.

Price Prediction

The section comprises of a detailed analysis of valuation based on the conclusions of the previous findings for use and analysis of property. 

Most Probable Buyer

The most probable buyer is a person who would be looking out for an investment opportunity in terms of capital growth and rental return. The site has extensive potential for development later and hence, the developers could fit in the position of the likely buyer for this site.

Methodology to Predict the Price

This section aims to give a supported analysis of the site specific to the real estate economic characteristics. Usually, it is the duty of the valuer to study the property from the traditional approach to value analytics such as income, cost and sales comparison.

The direct market approach is found to be the most appropriate approach for his method and hence it will be used to predict the market value of the given property.

The following has been conducted while preparing the valuation:

• Inspection of the site in the subject and the neighborhood.
• Sales and inspection of each comparable along with the confirmed sale and rental ,
• Confirmed data and application of the Sales Comparison Approach to value.
• Adjusted the results for the probable differences
• Compared the price per m2 of building are to come to an estimate rate

Comparable Sales

From the given table it can be witnessed that the comparable range of the price per building area is 3700-6900$/m2 which is unadjustable. The price per building has been used as a comparison variable rather than the price of land. Adjustments will be made later.

The comparable properties are as follows:

Assumptions

The above comparisons have been used assuming that the client would be retaining the site as it is shortly

The size has a unique size and therefore it is difficult to find exact size of site.

Transacted at arm’s-length

Adjustments

Market condition (Date of Sale)

Market condition often tends to change between the sale dates and effective date of valuation. The conditions tend to vary with respect to economic conditions, inflation rates and effective demand. The adjustment is made based on market conditions and not depending on the actual time between the date of valuation and the sale date. Therefore, if market conditions have not changed then no adjustment us required.  In this case, the market conditions have been similar in the last few years and therefore no such adjustment is required.

Quality

The above stated examples are of similar condition and therefore no adjustment is required in this case.

Building area

All the properties, which have been compared of different areas and need to be adjusted to be comparable.

Site Improvements/ Characteristics

Unlike the comparable sites, the subject site has a different size. However, the extra car parking land is underused and hence has a medium benefit. The extra land is necessary for benefit later on

• The site is located in the main area, which is very desirable.
• The use and locations is similar and therefore it is suitable

Summary of Adjustments

From the building adjustment, the resulting price range is coming to 150000$ to 300000$.

Results-Probable Price

In consideration to all sales and the analysis of the area, the adjusted current market value would be =

200000$

Two Hundred Thousand Dollars

(1300/m2)

Conclusions

The statement of work has been carried out according to the code of ethics and guidelines of the Australian Property Institute (API). The valuer is a registered member of such body and is a CPV.

Limiting Conditions

The report has been prepared under the following limiting conditions. If the client accepts the valuation, he is accepting these conditions:

• The report is based on information from wide range of sources and all data cannot be incorporated
• The valuer is under subject to no responsibility with respect to the economic or physical factors which may affect the opinion of the client
• The report or a copy of it does not carry publication rights. It cannot be used by anyone else other than the client
• The assumptions, which have been made by the valuer, have been made to the best of their ability.

References

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